The shocking truth about credit card rewards
Exclusive: Points-hungry Christmas shoppers chasing credit card rewards are being warned to think twice about using plastic after alarming new figures revealed piddling returns.
The value of rewards has plummeted in recent years making it far less attractive for customers trying to rack up points.
New analysis by financial services firm Canstar found for those who spend on average $24,000 on their credit card annually or $2000 per month, they are getting just $3 of value in return.
This is based on the card's balance being paid in full each month and factoring in the card's annual fee, which can be hundreds of dollars.
So, a voucher for $200 could be immediately erased, leaving the cardholder just a $3 return and limited ability to claim a decent reward.
Canstar's group manager of research and ratings Mitchell Watson said cardholders had to be far more picky about who they held a rewards card with.
"Over the past 24 months there have been a number of changes in the credit card market particularly following changes to interchange rules," he said.
"This has seen in some cases a reduction in the value of points earning capacity of tiering and caps."
Mr Watson said card users had ended up "earning less and less for their spending."
In 2017 interchange fees - the amounts charged between MasterCard and Visa and merchants - were limited, which meant lenders would make far less money on customer transactions and needed to recoup costs elsewhere.
Latest Reserve Bank of Australia figures found Australians have amassed $51.5 billion on credit and more than $31.7 billion is accruing interest.
The research found customers trying to hunt rewards would be better off getting complimentary travel insurance, more interest-free days or other incentives to offset low returns on their cards.
ME's general manager of cards and payments Michael Hendricks said "the marketplace is really changing."
"If you feel you are going to spend the money anyway and get Qantas Frequent Flyer points and they are value to you then that's fine," he said.
"But certainly the marketplace is really changing in terms of the value of these.
"Do you want to pay the annual fee or are you redeeming for some merchandise, is that really what you want."
Many credit card interest rates are more than 20 per cent so customers are warned to pay off their balance in full at the end of each month to avoid these charges.
TOP THREE CREDIT REWARDS CARDS
1. Jetstar, Platinum Mastercard.
Annual fee $169. Net return $311. Includes complimentary overseas travel insurance and extended warranty for purchases.
2. American Express, Essentials card.
Annual fee - nil. Net return $178. Complimentary smartphone screen insurance (up to $500.)
3. Latitude Financial Services, Infinity Rewards.
Annual fee $69. Net return $171. Uncapped points earning.
Source: Canstar.com.au. Based on $24,000 annual spend. Net return is based on the reward return minus the annual fee.